The Labour Government has used some of an improved budget position to extend its 25 cents/litre petrol tax cut by another two months to the end of March, but says this is likely to be the final extension as it looks to reduce its overall budget deficits and debt to take pressure off inflation in an election year.
The petrol levy cuts were initially launched as a temporary measure for three months in March this year after a jump in the oil price in the wake of Russia's invasion of Ukraine forced prices well over $3/litre. But the fuel tax cuts have been extended twice since then because of intense cost-of-living pressures and a backdrop of the Labour Government's falling political popularity.
However, oil prices have fallen in recent weeks to below pre-war levels and a 16% bounce in the NZ dollar in the last two months has dragged petrol prices back down towards $2 per litre. That highlighted the fiscal cost of the cuts, which have ramped up to a total cost of over $1b because of two extensions -- one in May and one in July.
Diesel RUCs cut ends earlier
Road User Charges (RUCs) for diesel vehicle drivers on public roads were also cut by the equivalent of 25c/litre, but those cuts will expire as scheduled on January 31. However, drivers can use their RUCs after January 31, so it's expected many will stock up on extra RUCs that can be used in subsequent months. Half-price public transport fares were extended by two months to the end of March and made permanent for about one million people who have community services cards.
Finance Minister Grant Robertson and Transport Minister Michael Wood made the announcement as Treasury published its Half Yearly Economic and Fiscal Update and released the 2023 Budget Policy Statement. Robertson emphasised the Government had chosen not to increase its operating allowances for new Government operating spending because he wanted to keep the pressure off inflation.
The HYEFU forecast the Budget Operating Balance before Gains and Losses would shrink this year and be close to balanced in the 2023/24 financial year, during which the election will be held. Net debt was forecast to fall from 21.4% of GDP in 2023/24 to 14.1% of GDP by 2026/27.
“We are continuing to manage the Government finances carefully by reprioritising savings, setting aside money for future investments while getting the books back into surplus,” Robertson said.
“Savings identified from unspent funding has taken pressure off debt, and allowed some of it to be redirected to important priorities, like the money to pay for the fuel tax cut, half price public transport and Cost of Living Payment," he said.
“Getting the books back in the black will help to keep a lid on debt and take inflation pressure out of the economy, giving businesses more space to invest."
Treasury sees recession
Elsewhere, Treasury forecast a three-quarter recession next year that cuts GDP 0.8% and a rise in unemployment to 5.5% by mid 2024.
The Government’s books are strengthened by higher nominal GDP growth boosting taxes, which the Government has used to get back to surplus quicker and take the pressure off inflation.
74 Comments
Political necessity. Political expediency. Government incompetence. Strategy undoubtedly oil prices will drop relatively to compensate any reimposition of the tax. They might too. They have been dropping recently. They also might rise again. Bit like my golf was, hit and hope.
Who buys 80k cars - Im picking not your average citizen. Then you get a rebate, then you pay no RUC's. Its just more misplaced virtue signal politicking that doesnt help those who dont have much. Its putting more into the pockets of the haves under the guise of saving the planet.
https://www.nzherald.co.nz/nz/politics/thomas-coughlan-government-books…
excerpts;
The Government’s books are in rude health: debt is forecast to track down, expenses and revenue are stabilising as a percentage of GDP and, defying expectations, a surplus is forecast for 2025.
Numbers released today in the Treasury’s half-year forecasts - known as the HYEFU - show a mixed picture: healthy Government books but an economy in pain.
And there’s one very important detail for Finance Minister Grant Robertson in the forecasts: Treasury thinks the Government’s management of the economy is not contributing to inflation. In fact, the Government’s relative restraint is forecast to help the Reserve Bank put the brakes on inflation by sucking demand out of the economy.
It even went so far as to say that the Government’s fiscal policy “reduces the need for the Reserve Bank to raise rates” in the future - translation: the Government’s tax take might be reducing pressure on mortgage-holders struggling with higher interest rates. A political win.
Oh and net debt - a number once thought so important it might have been the headline of this story - will peak at 21.4 per cent of GDP in 2024, before tracking down to 14.1 per cent in 2027 - that’s $68.2b in nominal terms.
House prices are expected to plummet. Treasury has updated its forecasts, and assumed prices will fall a further 15 per cent between September 2022 and December 2024, and only begin to recover in 2025.
The second piece of good news is that hourly wages are forecast to rise significantly above inflation for every year of the forecasts (not this year, obviously). Wages will grow at 6.8 per cent next year, above inflation of 6.4 per cent, the year after, wages will grow at 6.1 per cent, but inflation will grow at 3.5 per cent; by 2025, inflation will be 2.5 per cent, but wages will be 2.5 per cent, and in 2026, hourly wages will grow by 4 per cent, while CPI will be 2 per cent.
You would be better asking a bloke down the pub for projections than Treasury. As Treasury projections, don't take account of the real world, and how consumers and businesses will react to the changing macroeconomic environment.
Wages will not rise above 6%. Because immigration settings have loosened, and we are about to enter a construction led downturn. GST receipts will be down, due to reduced construction and reduced activity in allied sectors. GST will also drop off as spending reduces, as more people are laid off or no longer have access to overtime. In addition more disposable income will be diverted to increased mortgage payments, as mortgage interest rates reset. This will reduce government revenue. Company profits will decline, and more will end up on benefits or drop into income bands with higher working for families entitlements. Within 12 months the government books will be rooted. This is what will happen in the real economy, as opposed to what will happen within an ivory tower economy.
You should put yourself forward for the Nats Finance Minister,you sound more qualified for the job than Nicola Willis;
Willis was born and raised in Port Howard, Wellington. She is the eldest of three children.[4] Willis's mother was a journalist in the Parliamentary Press Gallery,[4] her father a partner in corporate law firm Bell Gully.[5] After a "privileged childhood", she first attended Samuel Marsden Collegiate, a private school for girls, before asking to spend her last two years of high school boarding at King's College in Auckland – a decision she regretted.[5]
She graduated with a first-class honours degree in English literature from Victoria University of Wellington in 2003,[6] and earned a post-graduate diploma in journalism from the University of Canterbury in 2017.[7] She was a member of the Victoria University Debating Society, and competed in international tournaments.
After graduation, she took up a position as a research and policy advisor for Bill English and went on to serve as a senior advisor to John Key in 2008[8] In 2012, Willis joined dairy co-operative Fonterra, taking on senior management roles, as well as serving on the board of Export NZ, a division of lobbyist group Business New Zealand.[9][10]
Late on parade this evening then. Where are the other 120 degrees or are you simply the obtuse angle? Admire though, the mettle to front up to the source of the bulletins. A good prospective centurion indeed. Just be careful not to get the keyboards muddled up again though.Only nine months work and then redundant and stand down.
Does Treasury also do forecasts on when ED waiting times will start to track back down? Or roading will get back to some acceptable standard? Or numeracy and literacy rates and attendance might head back up again in our schools?
Celebrating a surplus whilst ignoring all these is like celebrating savings in your bank account as the home you live in continues to fall apart because you aren't spending enough on maintenance.
Yes this. They could pump up public transport hugely with the money earned from putting the taxes back on. I look around and so many people are driving to work still when they have perfectly good public transport options that would cost them a lot less. Let petrol prices rise again you numpties, encourage other options. But they will have no choice but to extend it right through to the election now as another bribe.
Think about it GC:
As noted in the article,RUC's can be bought and used in the future within reason and in so doing extending the discount for RUC's an equivalent amount.Unless you have a certified fuel storage facility at home,you won't be able to front load the petrol discount beyond one fill of your tank...
"Diesel RUCs cut ends earlier
Road User Charges (RUCs) for diesel vehicle drivers on public roads were also cut by the equivalent of 25c/litre, but those cuts will expire as scheduled on January 31. However, drivers can use their RUCs after January 31, so it's expected many will stock up on extra RUCs that can be used in subsequent months."
Well, that's the theory, but you'll find NZTA have different ideas:
You should only buy enough RUC for the distance you intend to travel during the discount period.
If Waka Kotahi finds that your RUC purchases at the discounted rate have been excessive, unreasonable or are an abuse of the temporary rate reduction, we can charge you the non-discounted rates for your RUC.
If this happens, we’ll send you an invoice for your RUC at the normal rate. You'll have to pay the difference between the discounted rate and the normal RUC rates
Source: https://www.nzta.govt.nz/vehicles/road-user-charges/road-user-charges-r…
Given the discount period ends on January 31, there could be some awkward conversations and/or backtracking ahead. Then again, I guess one has to be in it to win it, and as long as one is expecting to have to pay back the difference at some point then really it's a decent bet.
strange --- fuel prices are below when the cut was introduced --- the best time to remove this was now --- politically end of Jan after the majority of people have been on holiday would have been ideal --
problem comes if the $ drops again -- or oil increases in the next three months -- both options being extremely viable.
Got Diesel at $1.97 today in Tauranga -- and 91 was $2.05 admittedly at Gull -- but still -- thats way way lower then when the reductions came in
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